In yet another proactive move, the insurance regulator, Insurance Regulatory and Development Authority of India, has come out with a proposal to segregate health insurance plans with colour coding and has asked the insurers for their feedback. In an attempt to “make product choice easier for the customer”, Irdai has suggested that all individual health plans by health and general insurers be accompanied by a diagramatic representation of colour coding.
All individual health plans will be allotted three colours—green, orange and red—to indicate the level of complexity of the product. The colour shall be decided on the basis of scores, which shall be on a scale of 0-6, and the scores will be assigned on seven parameters. These include cover options, waiting period, deductible, co-pay, sub-limits, exclusions and terms & conditions, and all will be given an equal weightage of 14.28%. So if a health plan has four optional covers, it will have a score of 2.4 (0.6 x 4); and if the co-pay of the plan is 10%, it’s score will be 1.5 (0.3 x 5).
The weighted average score of each parameter will be calculated by multiplying each parameter score with its weightage of 14.28%. These will then be added to get the final score of the product on a scale of 0 to 6.
The products with scores of 2 or less will be simple and green in colour; those with scores of 2-4 will be moderate and orange in colour; and those with scores of 4-6 will be complex and coloured red.
The new approach can be of help in the rural and semi-urban areas, where the penetration and knowledge about health insurance is abysmal. It will not only promote ease of buying but also prevent mis-selling, while helping the insurers further simplify their products.
However, the concept may need to be fine tuned further and several kinks ironed out before it is offered to the customers. For one, the seven parameters may not be fully representative of the product and the company. For instance, these do not include the serviceability or reach of the company, it’s claim ratio, premium loading, among others. Also, colour coding is only applicable to individual plans, not group plans. Besides, there are various other types of plans which may not garner appropriate scores on account of their format and structures. So the customer may have to wait till the final guidelines are specified before deciding on the utility of the concept.